Russian food retailer Lenta sees scope for more deals after its purchase of Billa, Chief Executive Vladimir Sorokin told Reuters, as the domestic market is still too fragmented, offering good opportunities for it to strengthen further.
Last month, Lenta agreed to pay 215 million euros ($261 million) for Billa Russia, as it wants to boost its presence in Moscow. Shortly before, its peer Magnit secured a $1.25 billion deal to buy the Dixy retail chain.
The Billa acquisition, yet to be approved by the regulator, would boost Lenta’s presence in Moscow and allow it to deliver online orders within an hour, Sorokin said. Lenta’s net debt to EBITDA would slightly rise from the current 1.7 times “but not dramatically.”
“Online business brought us 6.3 billion roubles ($87 million) in revenue last year, we think it will be significantly higher this year. Billa would help out (with online sales) specifically in Moscow where we have a 1.4% share,” he said.
Sorokin eyes more deals, mostly in the Russian regions and, potentially, in Moscow, too. “Experience shows that top 3-5 retail companies are earning, it is harder and harder for the rest given the scale issue,” he said.
Lenta’s closest peers, Magnit and X5, have all said they were looking for acquisition targets as competition in the sector, especially in online delivery, was intensifying amid the COVID-19 pandemic.
Lenta plans to continue to focus on hypermarkets, Sorokin said, and some could be turned into a hybrid model combining a usual walk-in space with areas used for online orders.
Lenta is looking at a possibility of a secondary share offering, Sorokin added – a process separate from the Billa deal – but there is no firm decision yet.
Source: Reuters.com